economics like Traditional Chinese Medicine

[stone]

When I read about "mainstream economics" I am left baffled. It seems based on an imaginary world with blatant  contradictions to what empirically happens in the real world we live in. Fancy maths is used to describe the imaginary world of mainstream economics without anyone seeming to care that the numbers that the models put out often head in the opposit direction to real world observations.
I couldn't get my head around how humans could investigate say biology in a seemingly rational (in my eyes) manner and yet for economics the mainstream was (in my eyes) other-worldly. It then struck me that biomedical science does have an intellectual tradition that comes across exactly like mainstream economics. Traditional Chinese Medicine seems to have all the same hallmarks. It too seems complex and yet tidy and internally consistent. Followers similarly seem untroubled by a lack of any evidence that the model fits with reality.
http://en.wikipedia.org/wiki/Qi

[AdamA]

I often think that there is as much fiction embedded in Western medicine as there is Chinese medicine, but maybe not as much as in economics.

[stone]

Adam, you are quite right about western medicine having its own dangerous delusions. Lobotomies are a classic example:-
http://www.bbc.co.uk/news/magazine-15629160

The procedure was invented by abstract deduction without recourse to testing any part of the theory by experiment. No formal clinical trials were done and patients were only followed up if they seemed to be improving- otherwise they were shut away in asylums and kept off the books. The inventor won a Noble prize.

I do think that much of western biomedical science is based on genuine observation of the real world though. Most of physiology, biochemistry, genetics etc seems to all hold together with what you actually get in the body.

[bigamish]

I do think that much of western biomedical science is based on genuine observation of the real world though. Most of physiology, biochemistry, genetics etc seems to all hold together with what you actually get in the body.

Agreed.  When in doubt, pay most attention to studies that are based on quantifiable, verifiable evidence and are are repeatable.

The dodgiest examples of modern western medicine (past & present) come from studies that ignore some or all of the above.

[MediumTex]

Economics is an art masquerading as a science.

Economics is also a lot like a priesthood or other religious order.  A lot of faith is required to keep the whole system of beliefs from collapsing.

[stone]

Medium Tex, I'm not sure that I understand what you mean about economics being an art. The theories are not supposed to have an aesthetic elegance. They are supposed to describe what is going on and possibly guide what is done in future based on how things work. Just as physics guides engineering or biology guides medicine or ecology guides fisheries management or whatever. I struggle to understand how economics can be so bad at what it does. Astronomers can not do experiments and yet do seem to be able to predict stuff and describe what is going on. Economists seem to have the easiest system of all when it comes to quantification of data- they have all the numbers in USD etc on the internet. Much of MMT does seem to predict some things much better than mainstream economics does. Japan seems to fit in with the MMT description. The mainstream react by simply not mentioning Japan. MMTers though are just as infuriating about not acknowledging when they screw up. They won't even acknowledge that there is a bull market for gold and has been since negative real interest rates have been in place

[Storm]

I struggle to understand how economics can be so bad at what it does. Astronomers can not do experiments and yet do seem to be able to predict stuff and describe what is going on. Economists seem to have the easiest system of all when it comes to quantification of data- they have all the numbers in USD etc on the internet. Much of MMT does seem to predict some things much better than mainstream economics does. Japan seems to fit in with the MMT description. The mainstream react by simply not mentioning Japan. MMTers though are just as infuriating about not acknowledging when they screw up. They won't even acknowledge that there is a bull market for gold and has been since negative real interest rates have been in place

I think Economics is one of the hardest sciences (if you can call it that) to study simply because there is not really a good way to do a controlled, double-blind study.  It's not like you can take two identical countries, give one of them stimulus and the other austerity and see what happens.  They can do limited studies on behavioral science, like giving people $20 and tell them they have to decide whether to bet on a horse or not, etc, but they really can't study macro economics scientifically.

Even astronomy, as you mentioned, can be studied through math.  We can look at Einstein's theory of relativity and prove mathematically whether it is true or not based on the speed that light travels, where stars are positioned in the sky, etc.  There is just not a good way to study economics, except perhaps through online games.

Speaking of online games, when we eventually have an online universe similar to the real world, but virtual, economics professors may be able to study economics much more effectively by running controlled experiments in these online universes.  It would be much more easy to test theories if you had two separate but equal online universes to use as guinea pigs.

[MediumTex]

Medium Tex, I'm not sure that I understand what you mean about economics being an art. The theories are not supposed to have an aesthetic elegance. They are supposed to describe what is going on and possibly guide what is done in future based on how things work.

I think of economics sort of like I do astrology.  It has almost no predictive value, but there are some kind of interesting insights about certain aspects of human nature in each belief system.

I meant "art" in terms of a set of ideas that are based upon creative thinking and speculation rather than objectively verifiable cause and effect relationships.

Just as physics guides engineering or biology guides medicine or ecology guides fisheries management or whatever. I struggle to understand how economics can be so bad at what it does.

Why does that surprise you?  Human history is full of people using very strange belief systems to make sense of the world, often with disastrous consequences.  As an example, it was probably some time after 1800 that medical science could claim that it had saved more people than it had killed.

Astronomers can not do experiments and yet do seem to be able to predict stuff and describe what is going on. Economists seem to have the easiest system of all when it comes to quantification of data- they have all the numbers in USD etc on the internet.

What the economist is trying to do is very difficult.  He is attempting to take a data set and use it to extrapolate human behavior.  By this point, I would think we all would have realized that human behavior is beyond prediction, mostly because all of us have both logical rationality and irrational emotion within us, and these competing sets of mental processes are always manifesting themselves in different ways.

The purely rational economic actor postulated by the economist, IMHO, simply doesn't exist.

Much of MMT does seem to predict some things much better than mainstream economics does. Japan seems to fit in with the MMT description. The mainstream react by simply not mentioning Japan. MMTers though are just as infuriating about not acknowledging when they screw up. They won't even acknowledge that there is a bull market for gold and has been since negative real interest rates have been in place

Human beings have a deep affection for storytelling and storytellers.  When we discover that one storyteller has been telling us incorrect stories, we normally start looking for a new storyteller, as opposed to re-thinking the whole concept of the role of storytelling in the search for truth.

Think about how little interest people would have in gathering around a campfire to hear someone say that he knew nothing about the future, only a little about the past, and was frequently bewildered by the present.  People want narrative, they want coherence, they want wholeness, they want meaning.  They don't want someone saying that the world is an uncertain place and that it is impossible to predict the future.

[stone]

Storm, from what I can see, they do get to see whether their predictions play out but they then ignore the results. Like astronomers they use maths. The maths suggests to astonomers what might be going on. They then look to see if they are correct and start again if not. The maths also suggests to economists what might be going on. They look and see that they are spouting BS and then pretend that isn't the case

[stone]

Medium Tex, "Think about how little interest people would have in gathering around a campfire to hear someone say that he knew nothing about the future, only a little about the past, and was frequently bewildered by the present.  People want narrative, they want coherence, they want wholeness, they want meaning.  They don't want someone saying that the world is an uncertain place and that it is impossible to predict the future."

If you talk to an astronomer or a biologist they WILL say that they are grapling with something they find desperately hard to even scratch the surface of. By the time they have enough evidence to publish they normally have preliminary data showing that things are actually more complicated. Economists all seem to think they only need to make themselves heard more forcefully.
 

[Tortoise]

If you talk to an astronomer or a biologist they WILL say that they are grapling with something they find desperately hard to even scratch the surface of. By the time they have enough evidence to publish they normally have preliminary data showing that things are actually more complicated. Economists all seem to think they only need to make themselves heard more forcefully.

Perhaps that is partly because economics is by its very nature intertwined with politics? To be sure, science in general can be very political (unfortunately), but that is because of institutional forces, not the nature of the subject matter itself. But in economics, the subject matter is inherently political in the sense that it necessitates discussion of the role of government and human freedom.

[Lone Wolf]

Although you are of course right, the good news is that at least the basics of microeconomics (such as supply and demand, opportunity cost, the way that prices convey information, etc.) are well-understood and do help you understand a tremendous amount about how the world works.

For example, even though predicting the future is difficult, anyone with such knowledge of basic economics had the ability to see that Richard Nixon's price controls were foolish and at least very likely to be a counterproductive failure.  I think that anyone would benefit from understanding these concepts.  Certainly we all benefit from a voting population that "gets" these ideas.

Fundamentally, I think that the value in economics comes from looking beyond the immediate effect or consequence of a particular action and understanding that it has other consequences which ripple out, many of which we may not like.  Just think of how often war is touted as an "economic stimulus".

To me, it's a little like evolution.  We know that it's a force that's governed by a well-understood set of laws... but good luck to any evolutionary biologist sitting in the late Cretaceous trying to figure out how it'd all turn out.  If it were me, I'd have said, "Bigger mosasaurs in the water and bigger, meaner T-rexes on land!"  I doubt I've have given the possums and other little furry "mammals" a second look. 

Something I like about the PP is that it makes its bets based on things that we do have a pretty good understanding of -- the difference between prosperity and recession and the difference between inflation and deflation.  After that, it's all about keeping the things you own close at hand, reducing risk, reducing costs, and then hanging on for dear life.  Simple and elegant.

Think about how little interest people would have in gathering around a campfire to hear someone say that he knew nothing about the future, only a little about the past, and was frequently bewildered by the present.  People want narrative, they want coherence, they want wholeness, they want meaning.  They don't want someone saying that the world is an uncertain place and that it is impossible to predict the future.

What a wonderful way to put it.  I think we're all trying to go through life experiencing as little cognitive dissonance as possible.  One way you can do that is to try to assemble a narrative, even where no clear one exists.

The other (much harder) way you can do it is to say, "I don't know" or "we'll see".  This one is hard as hell to do the first time.  Fortunately, it gets easier with practice.

[moda0306]

It's funny how the PP, in accepting that we don't know what's going to happen, gives us the peace of mind we'd been looking for by watching CNBC and reading the Wall Street Journal with some hope that something cohesive and believable about the future could be used as an investing guideline.  Buy and hold??? Stocks always win in the long-run??? Deflation is impossible??  US can't default???  Interest rates must go up??? Housing can't go down??

I was sick trying to figure this all out, and it probably didn't take all that persuasive of a snake-oil salesmen to sell me on a narrative.

Now we're sitting around the campfire with much more clarity, having discussions without the dense fog of political & recency bias (at least with enough cleared out that we are intellectually curious) in discussing different subjects regarding our past present and future, accepting that even if we think we're beginning to grasp something, we're probably only half understanding it and there are nuances to it that are outside our ability to predict. 

We've already accepted we're going to retreat to our tent without conclusions, but the lack of conclusions about things is the reason we have discussions on FDIC accounts, ETFs, fiat currency, leather chap durability, and survivalism... so its a given and we sleep anyway... as long as our air mattress doesn't deflate.

Ok... I'm done with the camping analogies... for now.

[MediumTex]

[quote=Lone Wolf]To me, it's a little like evolution.  We know that it's a force that's governed by a well-understood set of laws... but good luck to any evolutionary biologist sitting in the late Cretaceous trying to figure out how it'd all turn out.  If it were me, I'd have said, "Bigger mosasaurs in the water and bigger, meaner T-rexes on land!"  I doubt I've have given the possums and other little furry "mammals" a second look. [/quote]

That's nicely put. 

I would never say that economists don't have anything to offer us.  Rather, I would say that as a profession they have fallen into the temptation that has befallen many wise men throughout history--they take a subtle and insightful understanding of the world as a starting point, and then begin to infuse their teachings with supernatural overtones and themes so that a good amateur meteorologist from 3,000 years ago suddenly becomes a prophet of the sun god who requires a steady supply of virgins and luxury accommodations to maintain his communion with the supernatural.

In the case of economists, they clearly have some great tools in explaining why things are the way they are at a given point in time.  The trouble starts when a clever explanation of current or past events is used to extrapolate and predict the course of future events.  In my view, anyone who claims to know the future is claiming an ability to perform a supernatural feat--i.e., describe events that have not yet occurred.

Although the reference is getting a little dated, how funny would it be to see someone go on Kudlow dressed up as "Carnac the Magnificent" and make stock predictions?



Carnac: "Cash on the sidelines."

[Opens the envelope, looks surprised]..."One of three things that the new Maria Bartiromo doll will say when you pull her string."

[stone]

I love this example of an economist saying that the problem isn't that they fail to grasp what they are studying but instead that society does not defer to them sufficiently

http://factsandotherstubbornthings.blog ... under.html
Daniel Kuehn said...
Which lead me back to wondering why we haven't been able to "fix this like good technocrats" - and a lot of the reason is that there are a bunch of people who challenge technocrats in social sciences in a way that they wouldn't challenge engineers or some other applied natural science.
Which lead me back to the whole reason why I disagree with "technocracy". In a democracy we need to argue with these people, tempting as it is to be the man behind the curtain.

[Benko]

1. Paul Krugman has a nobel prize which kinda speaks for itself.

2. Like most areas of life people do not see what actually is e.g. economic data and what it means, or the "unexpected" (to them) consequences of their actions/preferred actions, they only see "what is" filtered through their skewed view of the world.

3. and traditional chinese medicine has at least some validity.